An AFCA case study: the $308,878 address change
by Julie Matheson CFP®, Finwise™ Leadership
Finwise recommends that every advice practice charge for its administration services. This isn’t about squeezing out more revenue. Work you don’t charge for usually goes unnamed, and work that goes unnamed is work you can’t prove you did. A recent AFCA determination shows exactly what that costs.
Finwise attends the FAAA Learn AFCA Case Studies webinars as part of our CPD and compliance knowledge. They are presented by AFCA senior representatives and FAAA Head of Professional Standards Robert Kimberley, and we recommend them. If you missed October’s session, here’s the case that stood out.
One phone call, $308,878
A client held two group life covers in super, worth $645,480 combined. He told his adviser he had moved, asked her to update his address, and said the insurance mattered to him. The update never reached the trustee. The Protecting Your Super opt-in notices went to his old address, and both covers were cancelled on 1 May 2020. By then his health meant he couldn’t replace them.
The firm argued there was no loss, because no claim had been made. AFCA disagreed: the policy had value, and that value was gone. AFCA also found the adviser should have explained the Protecting Your Super risk in the first place. The client was awarded $308,878.
There was no complex strategy and no product failure. The cause was an admin task nobody owned.
What the Code and the law already ask of you
The obligations behind that address change are written into the Code of Ethics and the Corporations Act.
Standard 8 says you must ensure your records of clients, including former clients, are “kept in a form that is complete and accurate.” Keeping a client’s details current with their product providers is record-keeping. It is a professional obligation, so it is professional work.
Standard 7 requires the client’s “free, prior and informed consent” to the fees they pay. It also requires you to be satisfied that those fees are “fair and reasonable and represent value for money.” A client can’t consent to, or see value in, a service hidden inside an overhead.
The value of diligence in the Code requires you to “perform all professional engagements with due care and skill.” When a client’s insurance depends on an admin task, that task is a professional engagement.
The best interests duty (s961B Corporations Act; RG 175) requires you to act in the client’s best interests in relation to the advice. Recommending insurance and then leaving its administration to chance undermines the advice itself. AFCA’s finding that the adviser should have explained the PYS risk makes the point.
Why charging makes the difference
Pricing your admin services does three things that “it’s all included” never will:
It names the service, so someone owns it (Standard 2).
It creates a process and a record, so you can show it was done (Standard 8).
It gives the client something to consent to and to value (Standard 7).
Some principals worry that listing services creates “fee for no service” risk. We see it the other way round. Listing a service forces you to build the system that delivers it, and that system is what would have caught this address change.
Start with our free 5-minute checklist
Practice owners are busy, so we’ve kept it to one page. For each admin task, it asks:
Who owns it?
How is it recorded?
Is it in your fees?
Then take one action to your next operations meeting: add administration to your price list, so clients can opt in or opt out.
Download the Admin Services Checklist
For more help in pricing services and advice contact:
Marie Richardson
Head of Growth & Partnerships
Finwise Leadership Australia
M: 0419 911 430
Disclaimer: This article is for general information only and is not intended as professional advice. Information is current at the date of publication and may be subject to change without notice.